Overview: When it comes to buying foreclosed properties there are three words that need to be remebered "PROCEED WITH CAUTION!".  With the current market conditions real estate experts are talking a lot about foreclosed properties and how now is a great time to look at buying a Foreclosure as either your personal residence or as an investment. During these times more upscale homes also go into foreclosure so the notion that only run down homes or homes in blighted neighborhoods is inaccurate. Beachfront and homes in affluent areas are also part of the selection of foreclosed properties available. However, when considering foeclosed properties you should forget about paying just pennies on the dollar.  In some cases you can buy foreclosed properties 30-40 percent below market value. Realistically though you should be prepared to pay around 5-10 percent below market value. Banks as a rule of thumb are still trying to get as much money as possible for their asset so you should be realistic when making an offer. One of the positive aspects about buying a foreclosure is the bank may give you a break on closing costs if it is purchased from them and maybe on the interest rate. It never hurts to ask.

Investment In Time: When looking to purchase a foreclosure be prepared to invest a significant amount of time in the process. This process can be daunting to the first time novice since they must learn to navigate the foreclosure process. It is highly recommended that you engage the services of  a real estate agent in your search. Many good buys are out there but they require research, preparation, patience and persistence. Again, this is where the services of a real estate agent can prove invaluable. However, just remember while a foreclosure can provide a buyer with a nice home at a very nice price it can also present problems that may not be apparent at first glance. So make sure you do your homework.

The Foreclosure Process Starts: When a home or property owner falls behind in their mortgage payments.  Normally before this happens these property owners may have been struggling for a year or more financially before they give up. When this happens the lender may decide to initiate foreclosure proceedings on the property. The lender will file a LIS PENDENS(Latin for "lawsuit pending") depending on the state. This document is a public record, and for buyers is the first step in locating a property in foreclosure.

Once A Home Has Been Located: Search the public records and look for liens on the property since they can affect the purchase price. Liens are normally placed on homes for back taxes. Also make sure to check assessed values and sales prices of neighboring properties.

Research Local State Foreclosure Laws: These laws may differ from state to state. Examples of this are Florida, New York, Ohio and Pennsylvania which require the lender to sue the home or property owner and get a court order in order to sell the property. This process is known as judicial foreclosure. Other states including California and Texas follow the non-judicial process foreclosure process, which doesn't require a lawsuit. 

This also means that the home or property may have not been getting the required upkeep for quite a while. Some of this deferred upkeep may include roof leaks, broken appliances, missing light bulbs, cracked windows, dirty carpets, floors and walls.  This can either be a detriment or a positive for the buyer since the home may be sold for an extremely attractive price. However, the cost of repairs may eat up what ever savings the buyer received when they purchased the home.  When looking at these properties just remember the first rule of real estate, "location,location,location," applies. Even if the home is trashed it may be worth considering if the resale values are high where the property is located.  If this is the case hold your nose and do a thorough walk through of the home and consider making a low offer.

For first time buyers, buying from the lender is the safest way to buy a foreclosed property. Again, it is highly recommended that you use a real estate agent  since most banks take back the home at the auction and hire a real estate agent to sell the property for them.